Retirement & Bankruptcy

Retirement & Bankruptcy

Bankruptcy may become a beneficial alternative to overwhelming financial stress at any time. For those on the brink of retirement, filing bankruptcy may seem like an underwhelming option. People in their fifties and sixties may be concerned about how filing for bankruptcy will impact their ability to retire. Although a reasonable position, the reality is that bankruptcy likely will not affect retirement savings. In fact, bankruptcy is an excellent means of starting retirement with a fresh start and clean slate.

The bankruptcy exemptions provided by both federal and state law protect certain types of property when a bankruptcy case is filed. Each state has its own exemption laws, and some allow debtors to choose between state law exemptions or federal law exemptions. While Utah has its own set of exemptions, in the case of retirement savings, bankruptcy law allows those who file bankruptcy to use the federal exemption regardless of whether their state legally permits it.

The following is a quick summary of retirement monies and how they are exempt under bankruptcy law. The effect of this is that filing bankruptcy carries little or no risk of losing valuable retirement savings for anyone on the brink of retiring.

Social Security

Social Security payments protected by federal law provided that this money is identifiable from the rest of a recipient’s finances. Social Security payments deposited into a personal bank account is a viable solution to this requirement.


Pensions that meet certain requirements are fully exempt when organized in 401, 403, or 408 plans. Pensions must be maintained by a tax-exempt organization and ERISA-qualified (the Employment Retirement Income Security Act of 1974).


401(k) accounts are extremely common retirement accounts. 401(k) and other qualified retirement accounts (such as 403(b)s, profit-sharing and money purchase plans, IRAs, and defined-benefit plans) fit within available bankruptcy exemptions and are protected in a bankruptcy case.


Traditional and Roth IRA’s are each protected up to $1,283,025. These amounts are adjusted and increased every few years. Thus, any retirement savings in an IRA will likely be protected in a bankruptcy case.

While saving for retirement after bankruptcy may seem like an overwhelming proposition, it may be easier than trying to save for retirement before bankruptcy since it eliminates the burden of debt. This results in even more money available for retirement savings.

Theron Morrison has helped 8,000 people, including many people on the brink of retirement, file bankruptcy and gain a fresh start. Call 801.456.9933 to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, Orem, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.

Theron Morrison

Theron Morrison

Utah’s top bankruptcy and consumer protection attorney.